Ongoing Shipbuilding Subsidy Row Takes a New Turn

SOUTH KOREA – JAPAN – EUROPEAN UNION – Some sixteen years ago the EU got in a bun fight with South Korea over some 200 loans made to that country's shipbuilders by the government which were deemed by the EU to be illegal subsidies. By 2005, having not had what it considered satisfaction from the World Trade Organisation (WTO) which heard the case, the EU had introduced Temporary Defensive Mechanisms (TDMs) which the Koreans appealed to the WTO violated the terms of the mutual trade agreements.

Now, in a rerun of the argument, the EU has requested it be allowed to join an existing complaint by Japan which alleges illegal subsidies are still being paid to shipbuilders to enable them to secure and complete contracts. The Subsidy and Countervailing Measures (SCM) and General Agreements on Tariffs and Trade (GATT) 1994 agreements lay down terms which the Japanese claim have been ignored by the Koreans. These agreements cover all aspects of the design, development, construction and marketing of a wide range of vessels, from container ships to oil, dry and gas carriers.

After some salad days for the country’s shipbuilders times have been tougher of late for the Korean yards with fierce competition, particularly from Asian neighbours, whilst estimates put the EU’s influence in the industry at between 20 and 30% of all maritime technological development. This includes many of the engines used to power the world fleet, plus a range of other equipment.

With the shipbuilding industry now long on production facilities and short on orders this is likely to be a bitter dispute which will run for some time under the contemplative gaze of the WTO.